MNCS Morning Navigator 16 September 2020

Global Market Highlight

DJIA was flat (+0.01%) on Tuesday (15/09) followed by S&P500 (+0.52%) and Nasdaq (+1.21%). The slight gain in global exchanges listed was driven by good news about vaccine developments and improving economic data. Three excellent vaccine candidates, namely AstraZeneca, Pfizer and Moderna, are back in the third phase of the trial phase.  This has raised optimism in the market, given that the AstraZeneca vaccine trial was stopped. Moreover, the market will look forward to several data releases today, such as: 1) US Retail Sales; 2) Japan Balance of Trade; 3) Eurozone Balance of Trade.

Domestic Updates

BPS released the Balance of Trade which posted a surplus of USD2.33 billion on August 2020. Export is recorded at USD13.07 billion, dropped by 8.36% YoY while Import is recorded at USD10.74 billion (-24.19% YoY). These decreases are beyond the consensus which estimated the export and import to drop by -5.79%/-20.58% YoY.

Company News

1.       PTBA IJin cooperation with Pelindo, will develop their coal transport capacity through ports and rivers in South Sumatera. These cooperation can potentially increase the capacityby up to 20 million ton per year while PTBA’s capacity as of 1H20 reached 11.7 ton. The target for FY20E is 23 million ton, which is downgraded in response of the lower demand due to pandemic (Investor.id) MNCS Comment: PTBA is also expanding their railway coal transport, so with railway and water transport combined, PTBA will be able to increase their overall capacity. Furthermore, PTBA coal production has reached 46.8% of their target this year, align with the economic recovery and returning demand, we believe PTBA will be able to achieve their target. PTBA is currently traded at 6.53x/1.20x PE/PBV.
2.       MDKA IJreported a rift on their heap leach pad in Tujuh Bukit Mine. This will impair the pipe and pum on the heap leach. Due to hazardous chemical on the heap leach process, the employee and mine workers has been evacuated while repairment has been planned.  Gold production will be delayed until the repair is done (Market Bisnis) MNCS Comment: We note that this event might affect MDKA’s gold production as they have just revised their target for FY20E by increasing 10.000 ounces, boosted by the increase on gold price. MDKA gold production has reached 55.81% from their newly set target and we believe MDKA will overly achieve their production. MDKA is currently traded at 32.46x/4.76x PE/PBV.
3.       FREN IJwill switch their mandatory convertible bond into stocks amounting to IDR3.4 trillion. This is in line with their plan to increase their issued and full paid capital from IDR28.14 trillion to 36.14 trillion. While FREN has used USD180 million of Capex for network expansion by building BTS (Investor.id). MNCS Comment: This corporate action will surely affect FREN’s stock but will be beneficial for the company. Furthermore, FREN is developing a 5G network in Indonesia; this catalyst will surely advantage FREN in the long run. FREN is currently traded at 1.60x PBV.

IHSG Updates

JCI tumbled by -1.18% to 5100.86 on Tuesday (15/09) followed by net foreign sell reaching IDR1.11 trillion. Stock prices dropped again while the Regional Asia indices are strengthening. The drop is led by finance sector (-2.14%) while property sector rose (+2.53%). It seems that the market players are worrying about the decline on import although balance of trade recorded a surplus. Because the decline on both export and import indicate that the domestic economy are still weak both in manufacture and production as well as in consumption.Meanwhile, the Rupiah exchange rate was strengthening at IDR14,845.We estimate JCI will move in the range of 4,879-5,220 while waiting for Interest Rate Decision. Today's recommendation: ACES, CPIN, ASII, HOKI

Corporate Action

RUPS: LCGP, BUMI, BLTA

Disclaimer On

ACES, CPIN, ASII, HOKI, MDKA, FREN, PTBA